Bond Funds

smooch · 12-19-2005, 08:00 PM

Can someone give me a simple explanation of the difference between return and yield on a bond fund?

. . . Yrs to Go · 12-19-2005, 08:18 PM

Return includes short-term gains and losses.

Yield expresses a bond's "return" if held to maturity.

Example: If you buy a bond on Jan 1 yielding 5% and interest rates go down by year end, your 1 year return (coupon plus capital gain) will be greater than 5%. But if you hold that bond to maturity your return for all periods will be 5%, equal to its original yield.

12-19-2005, 08:00 PM	#1
smooch Recycles dryer sheets Join Date: Nov 2004 Posts: 123	Bond Funds Can someone give me a simple explanation of the difference between return and yield on a bond fund?

12-19-2005, 08:18 PM	#2
. . . Yrs to Go Thinks s/he gets paid by the post Join Date: Sep 2005 Posts: 1,563	Re: Bond Funds Return includes short-term gains and losses. Yield expresses a bond's "return" if held to maturity. Example: If you buy a bond on Jan 1 yielding 5% and interest rates go down by year end, your 1 year return (coupon plus capital gain) will be greater than 5%. But if you hold that bond to maturity your return for all periods will be 5%, equal to its original yield.

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